Whether you work in the logistics industry or not, you’ve probably recognized a large increase in delivery vehicles on the road in recent years. If we go back to 2010, there was still some apprehension about buying online, and brick-and-mortar stores still had the greatest appeal to consumers. Around this time though, eCommerce giants began to emerge that would change the retail landscape forever. Companies like Amazon, Alibaba, and eBay brought much greater convenience and security to the online shopping domain, offering better value and choice at the same time.
Roll on 10 years, and those who had yet to embrace this lifecycle would have their hands forced too. The COVID-19 pandemic made traditional retail impossible for many, and with consumers spending more time at home, there was a need for consumers to go online for essential goods. This in turn led to a widespread adoption of eCommerce.
While last mile logistics was pioneered by delivery giants like UPS and FedEx decades ago, recent years have seen an explosion in their their activities as even the smallest of mom-and-pop stores have taken to online sales channels. According to a deep-dive market assessment by RationalStat, the 2023 valuation of the Global Last Mile Delivery Market stands at US$ 79.9 billion, with a projected substantial Compound Annual Growth Rate (CAGR) exceeding 8.1% during the forecast span from 2023 to 2030.
In this guide, we’ll take a closer look at what exactly Last Mile Logistics is, why it’s so important in the context of the wider supply chain and for your business, and some of its key components. We’ll also take a look at some of the key technological advancements that have changed the last mile landscape in recent years.
Finally, we’ll look at some strategies for setting up a successful last mile logistics business, and an example of how one of our customers has implemented a successful operation from the ground up.
What is Last Mile Logistics?
Last Mile Logistics, also referred to as last mile delivery, and final mile delivery, is the last step in the transportation process, where goods are transferred from a warehouse or distribution center to the end customer. When compared with other stages in the supply chain, last mile delivery is often associated with small volumes, but high quantities of parcels. With last mile delivery drivers the likes of Amazon and UPS often making upwards of 100 individual drops on a single route, last mile logistics requires much more planning and coordination to execute successfully.
Industry experts, SupplyChainDive estimate the total cost of last mile logistics represents 28% of a product’s total transportation cost. However, estimates elsewhere in the industry put that percentage closer to the 50% mark.
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The Last Mile Problem
Not only is the cost of the last mile disproportionate to the rest of the supply chain, but it also causes a lot of headaches. As the name suggests, the last mile problem has become a bit of a headache for couriers and third-party logistics operators in recent years.
The fact that it has become an industry-recognized term is a testament to that.
Not alone have parcel volumes increased for major carriers in recent years, but so too have the demands of customers receiving the products. For the likes of big players like Amazon, this might be seen as a success problem resulting from exceptional customer service in other areas of the buying journey, but for smaller operators and businesses undertaking their deliveries, it has thrown up a big challenge.
The last mile problem comes at a cost to smaller operators too.
Miss a delivery?
The cost of returning it to the depot, re-routing it the next day, and potentially having to contact the customer all eat into the profit margins of the products being delivered, often absorbing every last bit of it.
On top of the cost issues, there are also several other problems associated with last mile delivery, that don’t have the same impact on other stages in the supply chain. For example, traffic congestion, and sustainability both adversely affect the last mile.
The Importance of Last Mile Logistics
For many businesses weighing up the pros and cons of either contracting a third-party logistics company or investing in their fleet to deliver to consumers, it’s a double-edged sword:
- If you don’t do it, your competi tors will, and combined with retail giants like Amazon selling the same products, you’re going to lose out on business.
- If you do, well, you're going to have to establish a ruthlessly efficient process to make it a financially viable part of your business.
While those are two options, only one of those is really on the table. While businesses can still operate on a traditional retail basis where customers come in-store only to buy products, the reality is that many will choose the more convenient option of buying online.
While it might be viable now, there is no guarantee that it will remain that way into the future as a younger generation of consumers opts for the online option. And with even more convenient options like omnichannel retail and logistics picking up pace, that’s a reality you will have to face.
So, the importance of doing it is clear, but it becomes multiple times more important to do it right. The satisfaction of your customers and employees depends on it. The growth of your business depends on it. Ultimately, the financial security depends on having a water-tight last mile process in place at your store or warehouse.
And we don’t think anything could make it more important than that!
6 Key Components of Successful Last Mile Logistics
1. A reliable fleet or a reliable 3PL provider
First and foremost, getting goods delivered as promised is the core of a last mile service. And to do that, you need to have either a reliable fleet or a contract with a 3PL with one.
For most small-medium businesses, you’ll likely start by using a third-party operator to do deliveries on your behalf. In this scenario, the most important thing to make it a success drawing up a comprehensive Standard Licence Agreement (SLA). An SLA allows you to commit your delivery provider to provide a minimum level of service at all times, and if they fail to adhere to the agreed KPIs, you can exit the contract and hire someone else.
We’ve put together a comprehensive guide on Delivery Metrics below, but it’s something you might want to seek legal advice on before putting ink on top paper too: How to Measure Delivery Performance: 9 KPIs and Metrics you Should be Measuring
2. A well-organized, suitably located warehouse
If you are about to transition to doing your open D2C deliveries (direct-to-consumer), there is a lot more planning going to be required. However, a solid foundation is the foundation on which a successful last mile operation is built.
And that foundation is a well-organized, tidy, and well-located distribution hub or warehouse.
The location is more important than anything, and it may be worth your while to play the waiting game until one becomes available in a suitable area. Traffic and your current customer base's geographic proximity should be two key considerations, but there is a lot more to consider too.
If you’ve made up your mind that you want to do your deliveries, you might want to check out our guide: A Comprehensive Guide on Moving From 3PL to In-House Delivery
3. A fit-for-purpose delivery management system
Although we speak of last mile problems and the challenges associated with them, the reality is that there has never been a better or more lucrative time to get involved in last mile logistics.
Because as the industry has grown in recent years, so too have the technologies that can help to make it far more efficient than it was in the days of pen and paper.
Delivery Management Software is typically cloud-hosted (no installation cost or maintenance), very affordable, and provides exceptional ability to organize, forecast, and plan every aspect of the delivery process.
The key to making it work for you is to ensure that it does everything you need it to do, and having a comprehensive understanding of how to make it work before you begin using it.
You can check out our offering at the link below, but we strongly advise you to get in touch with us at the earliest stage possible. Our experts are constantly working with all types and sizes of businesses in the last mile industry, so they are well-positioned to advise you on how to maximize its features and benefits:
4. A route planning and route optimization software
Route planning and route optimization are at the very heart of successful last mile logistics.
In fact, in today's logistics world, it would be almost impossible to operate a delivery business without the assistance of it. There are two key reasons for this:
- Automated route planning software is estimated to reduce the time required to plan routes for 5 vehicles by 40 hours per week*. (That’s one full-time employee!)
- Route Optimization is estimated to reduce the distance traveled by delivery fleets by up to 33%*.
*These numbers are based upon pre and post-delivery management software implementations here at SmartRoutes across hundreds of delivery businesses.
With the benefit of economies of scale on the side of Amazon and UPS, the reality is that you need to reduce your overheads at every possible opportunity just to compete.
The beauty of route planning and optimization solutions is that they sync correctly with your online stores and order management systems and create routes based on the details of orders within those systems (order volume/size, delivery location, customer delivery time requests, etc.).
The reality is that these solutions remove the need for full-time employees and are not prone to errors associated with manual data entry.
Route planning and optimization solutions are standard as part of our delivery management solution, and you can learn more about how they work in the links below:
5. Happy and well-paid delivery drivers
If you’ve read this far, you might still be thinking that challenging the big players in the last mile space is an impossible task.
There is a unique advantage small and medium businesses have over big names though; the ability to provide a personal and friendly delivery experience that will go above and beyond that of the faceless corporation.
From our experience, having a driver who delivers with a smile is enough to keep customers coming back for more. Clean uniforms, comfortable delivery vehicles, and fair pay are all likely to encourage your workers to go the extra mile for your customers, and the investment will pay for itself long into the future.
It’s easy for us to say, but giving drivers the right technology is critical too. A delivery app with all the information they need about drop-offs, and a phone that works for them throughout the day are critical components.
You can check out some guides to last mile delivery apps and the best phones for drivers in the link below to learn more:
6. A ‘green’ last mile approach
While we all love the convenience of Amazon, there is also an increased understanding of the environmental impact of purchasing goods that need to be shipped across the world.
There is also a renewed interest in supporting local businesses, which create local jobs, and make the area you live in a better and more prosperous place to live.
For all of the Corporate Social talk from Big Business, the reality is that the most sustainable way to shop is by buying locally and buying from businesses that show they care about the impact they are having on the world.
The ‘green last mile’ is a movement amongst smaller businesses that offer consolidated deliveries to central pick-up points, measure their carbon reduction from initiatives like route optimization, and are making the transition to eDelivery vehicles.
You can learn more about how you can adopt a greener approach to last mile delivery by checking out our blog below:
Case Study: How Ridgeway Wagyu Fuelled The Success Of Their Online Shop With Last Mile Delivery Software
When looking for a successful last mile story, it might seem like an obvious choice to turn to a courier and delivery business that transformed how the business works.
However, independent retailers often serve as the best template for how to make the final mile work. Most have to build the service from scratch, and oftentimes, the survival of the business is completely dependent on making it work.
That makes Ridgeway Wagyu the perfect example of a last mile logistics implementation.
The business is a family-run, farm-to-fork beef business in Ireland. Although it initially started as a small operation, the quality of their product quickly gained a loyal customer base, and a reputation amongst high-end restaurants.
As the business scaled, they realized that there was a much greater demand for their product amongst customers far beyond the confines of the store on their family farm.
After setting up an online store where customers could order and have their beef delivered to their door, the demand quickly spiraled to a point where the logistics were taking up all of the time they previously sprinted crafting their product.
They turned to SmartRoutes for a solution and ended up integrating our delivery management system with their WooCommerce store to automate route planning, route optimization, and notifications to customers about expected delivery time.
[Learn more about how this transformed their last mile: Ridgeway Wagyu: A template for successful last mile delivery]
Struggling with your logistics operation? We have the answers
At SmartRoutes, we’ve been at the forefront of pioneering the best last mile logistics solution available today (don't just take our word for it, that’s independently-reviewed industry analysis).
If you're either starting your own delivery business or struggling with the chaos of your current operation, we’re here to help.
We’ve helped thousands of businesses to successfully establish ruthlessly efficient delivery processes that have had a measurable effect on business growth.
You can get in touch with one of our team here to set up a quick call to discuss how best to approach your unique delivery needs, and how our delivery management software can help.
Frequently asked questions
1. What is the last mile in logistics?
The last mile in logistics refers to the final stage of the delivery process where goods are transported from a distribution center or hub to the end-user, typically a residence or a business location. It's the last leg of the journey, often the most complex and expensive part of the supply chain due to its proximity to the end consumer.
2. Why is the last mile important in the supply chain?
The last mile is crucial because it directly impacts customer satisfaction and overall perception of a brand. It's the point where the customer interacts with the delivery service, and delays or issues during this phase can lead to dissatisfaction. Additionally, the last mile accounts for a significant portion of overall logistics costs, making it essential for optimizing efficiency and cost-effectiveness.
3. What is the main problem with last mile delivery?
One of the primary challenges in last mile delivery is the cost and complexity associated with reaching individual end customers dispersed across diverse locations. Factors like traffic congestion, limited delivery time windows, the need for specialized handling for certain products, and the increasing demand for same-day or on-demand deliveries pose significant challenges in this phase of logistics.
4. How can technology improve Last Mile Logistics?
Technology can significantly enhance last mile logistics by offering innovative solutions such as route optimization software, GPS tracking, real-time analytics, and automation. These tools help in optimizing delivery routes, providing accurate ETAs (Estimated Time of Arrival), enabling efficient resource allocation, and enhancing overall visibility and transparency in the delivery process, ultimately improving speed and reducing costs.
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